I'm reblogging this post on short sales because it contains a very useful timeline. I'm not sure I'd have clients sign it, but initials to acknowledge that this information has been disclosed to them. Since we have no control over the other parties we can't assure that these timelines will be adhered to, so I think there should be a disclaimer for liability reasons. Having said all that, presenting a timeline for the short sale process to buyers and sellers is very useful in setting expectations and keeping the transaction together.
ActiveRain MasterMinds - January 2011 - How Do We Improve the Short Sale Process?
Submitted by the Stalwart Six
Before we begin to address how to IMPROVE the short sale process, we believe we need to identify what's WRONG with the short sale process.
What is a short sale? Short sales are sales of real estate that cannot yield sufficient funds to fully pay all selling expenses and repay one or more mortgages.
In this article, we are going to address why short sale transactions do not successfully close and what we propose to increase the number of successful short sale closings.
Realtors, Sellers and Buyers
One of the bigger problems is the total lack of understanding of the short sale process on the part of Realtors, Buyers and Sellers.
The result of the misunderstandings of all parties is that
(1) the property is not listed at the appropriate price;
(2) the Buyer does not offer a fair or realistic price; and
(3) the Buyer gets frustrated with the amount of time required for approval and withdraws his offer, which puts the transaction process back to square one.
Now, how to price the property? The property must be priced at market value. Although the banks may agree to forgive a deficit, they are not in the business of giving homes away. Listing agents should market the property as they would market any other listing.
Buyer's agents need to show their buyers comparable properties and encourage their Buyers to offer a FAIR price. They also need to fully disclose the amount of time required to close a short sale and verify that their Buyer is willing to be patient.
One option to ensure that all parties understand the process is to have both Realtors, Buyer and Seller acknowledge and sign the attached timeline.
While we are not suggesting required education, we believe that a simple addendum to the contract will reduce the number of parties involved who may not be prepared to endure the length and complications of the process.
Proceed with the sales transaction in a normal manner. The Buyer must show their earnest intention of completing the transaction by:
- providing significant earnest money,
- conducting inspections and
- completing an appraisal through lender in a timely manner.
The more the Buyer has committed financially, the more likely they will stick with the transaction through successful closing.
Sellers must invest also. Sellers need to be informed of their role in the short sale, including continuing to pay HOA fees, allow showings, start preparing to move, keeping home tidy, paying utilities -- all things a Seller would do to attract a Buyer in a normal selling situation. Sellers should be encouraged to seek legal counsel and tax advice from respective experts. Short sales are treated differently in judicial and non-judicial states, and the Seller is encouraged to understand how this affects their situation.
Listing Realtors should be present when a BPO (Broker's Price Opinion) is done to ensure that all amenities or faults are known to the Broker involved and included in their assessment of the property. The preliminary HUD should include at least one year's property taxes that are not being paid to prevent surprises at closing.
LENDERS - we are not letting you off the hook.
The most effective thing a Lender could do to expedite the short sale process is to assign one PERSON to the file. AND, should Buyer #1 back out for any reason, the back-up contract should be introduced and proceed without starting from square one - in other words, pick up where you left off.
The servicer must communicate with the note holder(s) and agree to acceptable amounts for all parties up front. Perhaps offering some type of incentive to the servicer would increase the number of successfully closed SS transactions. Do not wait until the last minute to determine the amount awarded to the 2nd lien holder and do provide enough to the 2nd lien holder to give them incentive to successfully close the transaction.
Banks need to be more transparent and communicative. Lenders need to show their true willingness to support the short sale process by suspending all proceedings while the subject property is listed by a brokerage. Banks should be required to disclose whether it is more advantageous for the bank to foreclose rather than successfully complete the short sale transaction.
Our National, State and Local Associations must be part of the Solution!
Our national, state and local associations must begin an education campaign, including television ads, billboards, classes and pamphlets. Continuing education for Realtors should be offered and workshops for the general public should be provided. Better educated parties will result in increased successful short sale closings.
As always, Realtors® should follow the Code of Ethics and best represent clients. Don't paint a pretty picture when one does not exist. If you are not experienced with short sale transactions, pay a fee to an experienced colleague to help you navigate through the process, so that you do not LEARN about the short sale process at your clients' expense.
Submitted by the Stalwart Six
Team members left to right: Corinne, Tricia, Lori, Paulette, Sharon, Kat
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Lori is a residential Realtor with Chinowth & Cohen Realtors serving the greater Tulsa area and specializing in downtown Tulsa and midtown Tulsa real estate.